UK Cuts Infrastructure Appraisal Rate to 3% to Boost Investment

Britain is lowering its long-term public infrastructure appraisal discount rate from 3.5% to 3% as part of Treasury Green Book reforms, aiming to accelerate capital investment and improve how the government values generational projects.

The adjustment alters the fundamental economic calculation behind public spending decisions, reducing the penalty placed on benefits that materialize decades into the future. By lowering the discount rate, projects with long payback periods, such as rail networks, renewable energy grids, and regional regeneration schemes, will appear more economically viable under official Treasury appraisals.

Full details of the reforms and the government's formal response to the discount rate review are scheduled to be published alongside the budget on October 28.

What Is the Treasury Green Book?

The Green Book is the guidance issued by HM Treasury that sets out how government departments and agencies appraise and evaluate public spending, policies, and capital projects. It dictates how civil servants calculate whether a public investment provides value for money for taxpayers.

At the heart of these evaluations is the social discount rate, which reflects society's preference for receiving goods and benefits sooner rather than later. A higher discount rate heavily devalues benefits that occur far in the future, historically favoring short-term urban projects over long-term national infrastructure. Moving the rate down by 0.5 percentage points narrows that gap, altering cost-benefit ratios across the public sector.

Expanding Regional Pilot Programs

Alongside the national discount rate reduction, the Treasury is separately testing a new regional investment appraisal approach. This pilot program is currently underway across four distinct locations:

• Plymouth
• Liverpool
• Birmingham
• Port Talbot

These pilots aim to determine whether localized appraisal methods can better capture economic disparities and regional growth potential than traditional, centralized cost-benefit models.

The upcoming October 28 budget disclosures will provide clearer visibility on how these experimental regional frameworks interact with the newly revised 3% discount rate, shaping public infrastructure spending for the coming fiscal cycle.